Hedge funds raised billions from taking up short positions against lenders in March, as the collapse of Silicon Valley Bank (SVB) sent ripples across the global financial sector.
US$1.3bn was raised through short positions against Silicon Valley Bank, according to data firm Ortex, while US$848mln and US$684mln were made through bets against First Republic and Credit Suisse Group AG (NYSE:CS) respectively.
A total of US$7.2bn was raised across the US and Europe as hedge funds capitalised on the chaos of SVB’s collapse by selling borrowed banking shares to buy back later at a lower price.
London-based funds Marshall Wace, Argonaut Capital and US-based Azora Capital were among those which took to up short positions, including against Germany’s largest lender Deutsche Bank AG (NYSE:DB).
“March was the single most profitable month for short sellers in the banking sector since the 2008 financial crash,” Ortex co-founder Peter Hillerberg said.
California-based First Republic faced an 88.6% slump in its share price throughout March as it required a US$30bn support package from 11 banks, prompting short interest to make up 38.5% of its issued stock as of March 30.
Credit Suisse fell 70.5% meanwhile, with 14% of its shares wrapped up in bets on March 20, the day after it was sold to UBS.
6.1% of Deutsche’s shares were shorted by March 28, as its shares slipped 19% during the month.